In Guangzhou, Southern China, many younger motorists don’t crave the latest Tesla or supercar. Instead, they’re lining up to buy a home-grown SUV. The waiting period for the GAC Motor GS8 SUV can be up to three months.
Similar to the Toyota Highlander, produced by its sister joint venture company GAC Toyota, the GAC Motor-branded urban SUV has a 7-seat, 3-row layout with a body length of 4.8 meters.
Hai Han, a 33-year-old university administrator in Guangzhou, paid RMB5,000 deposit for his white GS8 last week. Sales staff told him that he would not be able to pick up his new car until July this year.
Since its launch six months ago, the GS8 has taken the Chinese market by storm. Sales in March exceeded 10,000; a barrier which was once considered impossible for domestic automobile brands. Priced from RMB 160,000 up to RMB 250,000, the high-end model has also broken the previous price wall of RMB100,000 for a domestic car. “Many people believed it was a dead end when they first heard the price,” said a manager from a GAC 4S salesroom. However, consumers have a different opinion.
Domestic auto brands contribute to GAC Group’s bottom line
Guangzhou-based GAC Motor is a subsidiary of GAC Group which also runs a joint venture with Toyota Motor Company, producing cars for Toyota, Honda, Fiat Chrysler and Mitsubishi. Its car range includes the smaller GS4 SUV, which sells about 30,000 models each month, and the medium and larger size GA8 sedan, which is said to be used by the Mayor of Guangzhou.
Latest official production and sales data from GAC Motor shows that sales volume in the first quarter reached 121,665, up 67 percent from last year. Sales of the GS4 reached 89,169, an increase of 35.5 percent.
Cui Dongshu, secretary-general of the China Passenger Car Association, said GAC Motor has put immense effort into developing SUVs over the past two years. Breaking out of the “low price and low quality” bracket, SUVs have played a key role in raising the profile – and profit – of domestic cars.
This is having a positive impact on the balance sheet of the holding company. The Group posted increased operating revenue of RMB 49.417 billion in 2016, a year-on-year increase of 67.98 percent. Net profit attributed to shareholders reached RMB 6.288 billion, an increase of 48.57 percent.
The homegrown GAC Motor brand accounted for 48 percent of the group’s total of RMB 6.288 billion profit. Domestic and JV companies now contribute equally to the group’s profit.
Director of China’s Automobile Industry Advisory Committee An Qingheng said the increasing profitability of GAC Motor is due to its high-end products and management structure. GAC Motor has effectively absorbed the lean management style of its Japanese partners; increasing the efficiency of the whole team. It also cites its "GAC-style production mode" as a success factor. GAC combines Chinese, European, US and Japanese research and development with its global supply chain to achieve growth.
International focus
Under the auspices of its “Brand First, Sales Later” international strategy, GAC Motor is going global. GAC Motor already sells its high-end cars in Kuwait, Dubai and Bahrain and is recognized by customers as the leading Chinese automotive brand.
Nigeria was the first country in Africa to import GAC Motor cars and currently has two dealerships. In 2016, GAC Motor exported more cars to Nigeria than any other Chinese automobile brand. Last year, GAC Motor established an SKD factory and became the first Chinese automotive brand to manufacture locally in the country.
GAC Group plans to expand further – to the U.S., Europe, South Korea, as well as developing markets in Asia and South America. GAC North America Research and Development Center is under construction and will open this year. GAC Motor brands are expected to enter the North American market no later than 2019.
